Beruff had first proposed the idea of removing independent agents from policy sales and underwriting in January, but was met with opposition from agents and other industry executives.
According to Beruff, paying commissions to agents helps increase the company’s policy count. But if Citizens adopts too many policies when a natural disaster hits Florida, their ability to pay claims could be overwhelmed and all insurance clients in the state would have to be screened to balance the shortfall, Beruff and other officials and lawmakers warned.
Citizens has about 700,000 policies as of September 18 and is expected to reach or exceed 765,000 by the end of 2021.
As the insurer of last resort for the state of Florida, Citizens’ success as a not-for-profit insurer is based on its ability to prevent business growth and transfer policies to private insurers. But Citizens’ consumers have grown significantly of late, either because private insurers raised their rates dramatically or stopped covering older homes and / or areas with high claim rates altogether – issues that have been linked to the exacerbation of severe weather and the increase in insurance fraud cases. in the state.
Citizens president and CEO Barry Gilway opposed the proposal and disagreed with Beruff’s argument that removing agents would lower the insurer’s policy count. He also objected to the idea of agents being an unnecessary expense, noting that Citizens’ 7% commission is significantly less than the 11% -12% that agents get through private insurers, which should also deter to agents to place consumers with Citizens. However, the majority of the members of the Ciudadanos board overruled the president.
Sun Sentinel of South Florida rIt reported that Citizens relies on approximately 7,500 independent agents from 2,500 agencies to exclusively sell its windstorm and property insurance to clients who cannot obtain coverage elsewhere. The Florida legislature would have to approve Citizens’ switch to a direct selling model.